Source: The Hitavada      Date: 29 Nov 2017 12:03:28

AMIDST dooms day predictions by the Opposition parties, the latest survey by the economists of the Federation of Indian Chambers of Commerce and Industry (FICCI)points to winds of positive change in the growth numbers in the second quarter of this fiscal. The survey expects the July-September quarter to clock 6.2 growth, up from the three-year low of 5.7 pc in April-June quarter of 2017-18. The survey attributes this optimism to the bottoming out of the adverse impact of demonetisation and stabilisation of the new indirect tax regime. The International Monetary Fund (IMF) and a noted global rating agency too had very recently indicated growth prospects improving over the next few months as a consequence of various economic and policy reforms undertaken by the Government.

These international entities believe these measures will ensure ease of doing business in India and attract investment from domestic as well as global investors.
Tongues had began to wag when the growth rate had
plummeted to the three-year low of 5.7 pc and all blame was placed on the Government’s major decisions to demonetise the high value currency notes and ushering in the Goods and Services Tax (GST) indirect tax regime throughout the country, accusing the Government of taking recourse to economically disastrous decisions.

However, the Government was not unduly perturbed and it was sure what the economy was going through was the teething trouble and once the situation stabilised on both counts, the growth numbers would begin to regain their original higher level. While the Opposition was not convinced on the Government’s claims, independent bodies were doing their own assessment of the situation. And their studies revealed that the Indian economy’s fundamentals were still strong and it was only a matter of time the pick-up would happen, notwithstanding the temporary set-back of the April-June quarter of the 2017-18 fiscal. Accordingly, results are showing signs of recovery. FICCI’s survey is pointer to that optimistic change.

However, the FICCI economists also emphasise the need for the Government to persist with its emphasis on ‘productive capital investment in the social sector and physical infrastructure.’ This of course will put some strain on the budgeted fiscal deficit by the Finance Minister in his budget. But the uptick would be only marginal and would have not much impact on financial discipline but only help in giving fillip to economic activity.

The survey also lays stress on reviving consumption, especially in the rural and semi-urban sectors for their potential population numbers. If consumption is revived in these parts of the country, there will be a boost to demand for manufactured goods for which the manufacturing sector is eagerly waiting. With nearly two-thirds of population living in the rural and semi-urban parts of the country it is important that consumption revives in those parts. But this again will depend on how the agriculture sector fares in the current crop season as the rural economy very heavily depends on agriculture for sustenance, income generation and employment.

Of course there is one more area of concern for the Finance Minister, the Current Account Deficit (CAD). While imports have grown substantially over period, especially on account of gold and crude oil imports, exports have shown a declining trend. Thus along with the uptick in domestic demand and pick-up in the manufacturing sector, it is essential that efforts are made to shore up exports. But the real revival will begin when private investment picks up pace.